The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

According to experts inside Alberta Energy, it’s much more profitable to refine more of our oil before we ship it. Both the Alberta and federal governments are now pointing to the “oil price differential” as the culprit that has forced them to revamp budget projections and talk darkly about the need for cuts to programs, services and public employees.

But is this really true? Or is it just a complicated but convenient excuse that draws attention away from deeper problems?

A 2011 Alberta government research document recently released to the Alberta Federation of Labour after a lengthy tussle with the Freedom of Information gatekeepers suggests that it is a convenient excuse. “The premier is telling only half the story,” says AFL president Gil McGowan.

The oil price differential is not something people think about, even in Alberta. It’s the kind of numbers game that only experts in the field usually pay attention to.

To put it simply, the oil price differential is the gap between the price Alberta producers get for the heavy oil that comes from the oilsands and the benchmark price for West Texas Intermediate, which is a lighter oil. Right now the U.S. has access to lots of lighter oil, so our unrefined oil is less desirable and fetches less per barrel.

According to the Alberta government, Alberta heavy oil producers are getting $30 a barrel less than the benchmark priceAlberta heavy oil producers are getting $30 a barrel less than the benchmark price. And this is the main reason, says Premier Alison Redford, the provincial treasury has a $6 billion shortfall to deal with. Federal Finance Minister Jim Flaherty is using the same excuse for reduced federal revenues.

So, you might ask why don’t we refine more of our oil before we ship it south or ship it anywhere for that matter? Wouldn’t that make more economic sense?

According to the experts inside Alberta Energy who wrote the research paper that was stamped “secret” and never publicly released, it certainly does make more economic sense for a key sector of the oilsands industry, especially when there is a large price differential.

“Stand alone mining is sensitive to changing light-heavy differentials while integrated mining is much less responsive. Despite the fact that adding upgrading capacity makes less sense in today’s market (in 2011 oil was selling at $100 per barrel) our sensitivity analysis suggests an integrated upgrader serves as a hedge against volatility of light-heavy differentials,” they wrote.

In other words, in today’s market where the oil price has slipped and the differential is greater, the oilsands players who mine and refine oil are much more profitable than those who simply mine and ship it south. And profitability means more money for both the overall economy and the provincial and federal treasuries.